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FEDERAL RESERVE B A *
OF M E W YORK
[
Circular No. 10245 ~|
June 29, 1988
AMENDMENTS TO REGULATION J IMPLEMENTING
PROVISIONS O F T H E EXPEDITED F U N D S AVAILABILITY A C T
To All Depository Institutions, and Others Concerned,
in the Second Federal Reserve District:
T h e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m h a s is s u e d a n a m e n d
m e n t to its R e g u la tio n J , e f f e c tiv e S e p te m b e r 1, 1 9 8 8 , to c o n f o r m th a t r e g u la tio n to
th e n e w R e g u la tio n C C , “ A v a il a b il ity o f F u n d s a n d C o l le c tio n o f C h e c k s , ” w h ic h
w a s a d o p t e d b y th e B o a r d o n M a y 13 to im p l e m e n t th e p r o v is io n s o f th e E x p e d i te d
F u n d s A v a il a b il ity A c t.
E n c l o s e d — f o r d e p o s ito r y in s titu ti o n s a n d o th e r s w h o m a in ta in s e ts o f th e
B o a r d ’s r e g u la tio n s — is th e te x t o f th e a m e n d m e n t to R e g u la tio n J , w h ic h h a s b e e n
r e p r in te d f r o m th e Federal Register o f J u n e 13; c o p ie s o f th e a m e n d m e n t w ill b e
f u r n is h e d to o th e r s u p o n r e q u e s t d ir e c te d to th e C ir c u la r s D iv is i o n o f th is B a n k
( T e l. N o . 2 1 2 - 7 2 0 - 5 2 1 5 o r 5 2 1 6 ) . Q u e s t io n s r e g a r d in g th is m a tte r m a y b e d ir e c te d
to R a le ig h M . T o z e r , C o u n s e l ( T e l. N o . 2 1 2 - 7 2 0 - 5 0 3 3 ) .
E . G e r a l d C o r r ig a n ,
President.
Board of Governors of the Federal Reserve System
COLLECTION OF C H E C K S A N D O T H E R ITEMS
A N D WIRE TRANSFERS OF FUNDS BY FEDERAL RESERVE BANKS
AMENDMENTS TO REGULATION I
(Effective September 1, 1988)
FEDERAL RESERVE SYSTEM
a n d th e e x p e d ite d re tu rn of ch eck s. O n
M ay 13,1988, th e B o ard issu e d a n ew
12CFR Fart 210
re g u la tio n (R egulation CC— A v a ila b ility
of F u n d s a n d C o llectio n of C h e ck s— 12
[0@eket No. R-©§20]
CFR P a rt 229) to im p lem en t the
Collection of Checks and Other Items E x p e d ite d F u n d s A v a ila b ility A c t (53 FR
19372 (M ay 27,1988)). S u b p a rt C of
and Wire Transfers of Funds by
R e g u latio n CC e s ta b lis h e d n e w rules,
Federal Reserve Banks
a p p lic a b le to d e p o sito ry in stitu tio n s a n d
A©iwev: B o ard of G o v e rn o rs o f the
c e rta in o th e r fin a n c ia l in stitu tio n s,
F ed era l R e serv e S y stem .
d esig n ed to sp e e d th e co llec tio n a n d
AOTW. Final rule.
re tu rn of ch eck s. T h e se ru les co v e r th e
ex p e d itio u s re tu rn re sp o n sib ilitie s of
SUMMARY: The Board is amending its
p ay in g a n d retu rn in g b a n k s,
Regulation J— Collection of Checks and a u th o riz a tio n of d ire c t re tu rn s,
Other Items and Wire Transfers of
n o tific a tio n of n o n p a y m e n t o f larg eFunds by Federal Reserve Banks (12
d o lla r re tu rn s by th e p ay in g b a n k , ch eck
CFR Part 210) to conform that regulation in d o rse m e n t s ta n d a rd s , a n d o th e r
to the regulation the Board adopted on
re la te d c h a n g e s to th e ch eck co llec tio n
May 13,1988, implementing the
sy stem .
sp e cific ally a d d re s s e d th e p ro p o sed
a m e n d m e n ts to R e g u latio n J.
T h e B o ard h a s a d o p te d a m en d m e n ts
to S u b p a rt A o f R e g u latio n J. T h ese
c h a n g e s g e n e ra lly co n fo rm R egulation J
to th e ru le s e s ta b lis h e d in S u b p art C of
R eg u latio n CC. T he ch a n g es are
th e re fo re te c h n ic a l in n atu re : the
su b s ta n tiv e issu e s w e re c o n sid ered
d u rin g th e ru lem ak in g p ro ce ed in g th a t
re su lte d in th e a d o p tio n of R e g ulation
CC. T h e co nform ing am e n d m e n ts, inter
alia:
1. C h an g e th e title o f R e g u lation J from
“ C o llec tio n of C h e ck s a n d O th e r Item s
a n d W ire T ra n sfe rs of F u n d s" to
"C o lle ctio n of C h eck s a n d O th e r Item s
a n d W ire T ra n sfe rs of F u n d s by F ed eral
R e serv e B a n k s” to d istin g u ish
R e g u la tio n J from R eg u latio n CC
{“A v a ila b ility o f F u n d s a n d C ollection of
C h e c k s”), a n d m a k e it c le a r th a t
R eg u la tio n J co v e rs only ch eck s clea re d
o r re tu rn e d th rough a F e d e ra l R eserve
B an k a n d w ire tra n sfe rs tra n sm itte d
o v er th e F e d e ra l R e serv e
C o m m u n ic atio n s S ystem , w h ile
R eg u la tio n C C co v e rs all ch ecks. A
sim ila r c h a n g e is b ein g m a d e to the title
of S u b p a rt A.
2. A m en d th e a u th o rity c ita tio n s to
in c lu d e th e E x p e d ite d F u n d s
A v a ila b ility A ct.
Expedited Funds Availability Act of
Prior to the passage of the Expedited
1987 (Regulation CC—Availability of
Funds and Collection of Checks (12 CFR Funds Availability Act, the Board had
established, under the authority of the
Part 229)).
Federal Reserve Act, a regulation to
EFFECTIVE ©a y s : September 1,1988.
govern the collection of checks and
F®61
INFORMATION CQNTACT:
other items by Federal Reserve Banks
Joseph R. Alexander, Senior Attorney,
(Subpart A of Regulation J (12 CFR Part
Legal Division (202/452-2489): for the
210)). When the Board published its
hearing impaired only.
proposed Regulation CC for comment
Telecommunications Device for the
(52 FR 47112 (Dec. 11,1987)), it also
Deaf, Eamestine Hill or Dorothea
proposed a number of amendments to
Thompson (202/452-3544).
Regulation J to conform that regulation
iUPFLIMINTAKV in f o r m a t io n : In
to the new check collection and return
August 1987, Congress enacted the
rules proposed in Subpart C of
Expedited Funds Availability Act (Title Regulation CC. Although approximately
3. Conform the definitions of
VI of Pub. L. 100-86). The Act seeks to
Regulation J to those adopted for
1,000 comments were received on the
ensure the prompt availability of funds
Regulation CC where appropriate.
combined proposal, no comments
PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 53, NO. 113, pp. 21983-21986.
For this Regulation to be complete, retain:
1) Regulation J pamphlet, effective January 1, 1987.
2) This slip sheet.
[Enc. Cir. No. 10245]
4. Provide for the handling by Reserve
Banks of returned checks that the
Reserve Banks did not handle during the
forward collection process.
5. Conform the provisions regarding
returned checks to the provisions of
Regulation CC that eliminated the right
of charge-back provided for in the
Uniform Commercial Code and
Regulation J prior to these amendments.
6. Remove the requirement that a
paying bank give notice of nonpayment
in the case of large-dollar returns. (This
requirement is now in Regulation CC.)
In addition, the Board is eliminating
footnote 2 to § 210.2(g) of Regulation J.
Section 210.2(g) restricts the definition of
“item” to instruments that can be
collected at par. Footnote 2 states that
“(tjhe Board publishes a ‘Memorandum
on Exchange Charges,’ listing the banks
that would impose exchange charges on
cash items and other checks forwarded
by Reserve Banks and therefore would
not pay at par.” Since November 1980,
no banks have imposed exchange
charges on items forwarded by Reserve
Banks, and the Board has discontinued
publication of the “Memorandum.”
Consequently, footnote 2 no longer
serves any purpose, and the Board is
deleting it from Regulation J. Although
the Board did not publish the removal of
the footnote for comment along with the
other proposed changes, the Board finds
that publication is unnecessary under 5
U.S.C. 553(b).
The amendments the Board is
adopting, are technical in nature and are
not expected to have any significant
economic effect on small entities (see 5
U.S.C. 601 e t seg.), nor do they impose
any burdens on the public under the
Paperwork Reduction Act (44 U.S.C.
3501 et seq.).
List of Subjects im 12 CFR Part 21©
Authority: Federal Reserve Act, sec. 13 (12
U.S.C. 342), sec. ll(i) (12 U.S.C. 248(i)), sec. 16
(12 U.S.C. 248(o) and 360), and sec. 19(f) (12
U.S.C. 464); and the Expedited Funds
Availability Act (12 U.S.C. 4001 et seg.)
3. The title of Subpart A is revised to
read as follows:
Subpart A—€©ll@ctson ©? Checks
©Sfe@ Items
r
Federal Reserve Banks
4. Section 210.1 is revised to read as
follows:
§ 210.1 Authority, purpose, and scop®.
The Board of Governors of the Federal
Reserve System (“Board”) has issued
this subpart pursuant to the Federal
Reserve Act, section 13 (12 U.S.C. 342),
section ll(i) (12 U.S.C. 248(i)h section 16
(12 U.S.C. 24S(o) and 360), and section
19(f) (12 U.S.C. 464); the Expedited
Funds Availability Act (12 U.S.C. 4001 et
seq.); and other laws. This subpart
governs the collection of checks and
other cash and noncash items and the
handling of returned checks by Federal
Reserve Banks. Its purpose is to provide
rules for collecting and returning items
and settling balances.
5. In § 210.2. paragraph (e) and (f) and
the undesignated paragraph at the end
of paragraph (g) are revised, footnote 2
in paragraph (g) is deleted, paragraph (j)
is revised, paragraphs (k) and (1) are
redesignated as paragraphs (1) and (m),
a new paragraph (k) is added, the
introductory text of redesignated
paragraph (1) is revised, and the
undesignated paragraph at the end of
§ 210.2 is revised to read as follows:
§210
*
<
r
©efioltea.
*
f
i
i
t
(e) “Cash items” means—
(1) A c h e ck o th e r th a n o n e c la ssifie d
a s a n o n c a sh ite m u n d e r th is sectio n ; o r
Banks, Banking, Federal Reserve
System.
(2) A n y o th e r ite m p a y a b le o n d e m a n d
a n d c o llec tib le at p a r th a t th e R e serv e
For the reasons set out in the
B ank o f th e D istric t in w h ic h th e ite m is
preamble, effective September 1,1988,
Title 12, Chapter II, Part 210 of the Code p a y a b le is w illing to a c c e p t a s a c a sh
item . “C a sh ite m ” d e e s n o t in c lu d e a
of Federal Regulations is amended as
re tu rn e d check.
set forth below:
(f) “Check” means a draft, as defined
in the Uniform Commercial Code, that is
drawn on a bank and payable on
PART 210—REGULATION J
demand. “Check as defined in 12 CFR
(COLLECTION ©F CHECKS AMD
229.2(k)“ means an item defined as a
OTHER 8TEG3SAMD WORE TRANSFERS check in 12 CFR 22S.2(k) for purposes ot
@ FW
F SB/S m FEDERAL RESERVE
Subpart C of Part 229,
HAIMS)
(g) * * *
2. The authority citation for Part 210 is U n less o th e rw ise in d ic a te d , "item "
e lu d es b o th a c a s h a n d a n o n c a sh
revised to read as follows:
1. The title of Part 210 is revised to
read as follows:
2
item, and includes a returned check sent
by a paying or returning bank. "Item”
does not include a check that cannot be
collected at par, or an “item" as defined
in § 210.2® that is handled under Subpart
B.
*
0
6
0
6
(j) “Paying bank" means—
(1) The bank by which an item is
payable unless the item is payable or
collectible at or through another bank
and is sent to the other bank for
payment or collection*,
(2) The bank at or through \vhich an
item is payable or collectible and to
which it sent for payment or collection:
or
(3) The bank whose routing number
appears on a check in magnetic
characters or fractional form and to
which the check is sent for payment or
collection.
(k) “Returned check" means a cash
item or a check as defined in 12 CFR
229.2(k) returned by a paying bank,
including a notice of nonpayment in lieu
of a returned check, whether or not a
Reserve Bank handled the check for
collection.
(l) “Sender" means any of the
following that sends an item to a
Reserve Bank for forward collection:
* * *
*
i
t
f
t
f
t
f
t
Unless the context otherwise requires,
the terms not defined herein have the
meanings set forth in 12 CFR 229.2
applicable to Subpart C of Part 229, and
the terms not defined herein or in 12
CFR 229.2 have the meanings set forth in
the Uniform Commercial Code.
6. Paragraph (b) of § 210.3 is revised to
read as follows:
§2 1 0
*
f
t
Genera? pswite^sne.
f
t
f
t
f
t
(b) B inding e ffe c t This subpart,
together with Subpart C of Part 229 and
the operating circulars of the Reserve
Banks, are binding on all parties
interested in an item handled by any
Reserve Bank.
f
t
f
t
f
t
f
t
f
t
7. Paragraph (a)(1) of § 210.6 is revised
to read as follows:
§ 210.8 Status, warranties, and liability of
resents teak.
(a)(1) Status and Liability. A Reserve
Bank shall act only as agent or subagent
of the owner with respect to an item.
This agency terminates not later than
the time the Reserve Bank receives
payment fo? the item in actually and
finally collected funds and makes the
check received by it (or sent direct to
Reserve Bank’s operating circular.
another Reserve office for the account of (c) Paying b a n k’ and returning
s
that Reserve Bank) is counted as
ba n k’ agreement. By sending a returned
s
reserves for purposes of Part 204 of this check to a Reserve Bank, the paying
chapter (Regulation D) and becomes
bank or returning bank—
available for use by the sender or
(1) Authorizes the receiving Reserve
paying or returning bank. The Reserve
Bank (and any other Reserve Bank or
Bank shall give either immediate or
returning bank to which the returned
deferred credit in accordance with its
check is sent) to handle the returned
time schedule to a sender or paying or
check subject to this subpart and to the
returning bank other than a foreign
Reserve Banks’ operating circulars;
correspondent A Reserve Bank
(2) Makes the warranties set forth in
ordinarily gives credit to a foreign
12 CFR 229.34; and
correspondent only when the Reserve
(3) Agrees to indemnify each Reserve
Bank receives payment of the item in
Bank for any loss or expense (including
actually and finally collected funds, but, attorneys’ fees and expenses of
in its discretion, a Reserve Bank may
litigation) resulting from—
give immediate or deferred credit in
(i) The paying or returning bank’s lack
§ 210.7 Presenting items for payment.
accordance with its time schedule.
of authority to give the authorization in
* * * * *
(b) Notwithstanding its time schedule, paragraph (c)(1) of this section;
(b) Place o f presentment. A Reserve
a Reserve Bank may refuse at any time
(ii) Any action taken by a Reserve
Bank or subsequent collecting bank may to permit the use of credit given for any Bank within the scope of its authority in
present an item—
cash item or returned check, and may
handling the returned check; or
(1) At a place requested by the paying defer availability after credit is received
(iii) Any warranty made by the
bank;
by the Reserve Bank for a period of time Reserve Bank under 12 CFR 229.34.
(2) In the case of a check as defined in that is reasonable under the
(d) Recovery by Reserve Bank. If an
12 CFR 229.2(k), in accordance with 12
circumstances.
action or proceeding is brought against
CFR 229.36;
11.
Section 210.12 is revised to read as if defense is tendered to) a Reserve
(or
(3) At a place requested by the
follows:
Bank that has handled a returned Check
nonbank payor, if the item is payable by
based on—
a nonbank payor other than through or § 210.12 Return @ cash item© and
tf
(1) The alleged failure of the paying or
handling of returned ehee&s.
at a paying bank;
returning bank to have the authority to
(4) Under a special collection
(a) Return o f cash items. A paying
give the authorization in paragraph
agreement consistent with this subpart; bank that receives a cash item directly
(c)(1) of this section;
or
or indirectly from a Reserve Bank, other
(2) Any action by the Reserve Bank
(5) Through a clearinghouse and
than for immediate payment over the
within the scope of its authority in
subject to its rules and practices.
counter, and that pays for the item as
* * * * *
handling the returned check; or
provided in § 210.9(a) of this subpart,
(3) Any warranty made by the
9. Section 210.9 is revised by
may, before it has finally paid the item,
Reserve Bank under 12 CFR 229.34,
redesignating footnote 3 as footnote 2,
return the item in accordance with
and revising the first sentence of
the Reserve Bank may, upon the entry of
Subpart C of Part 229, the Uniform
paragraph (e) to read as follows:
a final judgment or decree, recover from
Commercial Code, and its Reserve
the paying bank or returning bank the
Bank’s operating circular. The rules or
§ 210.® Payment
amount of attorneys’ fees and other
practices of a clearinghouse through
* * * * *
expenses of litigation incurred, as well
which the item was presented, or a
(e)
Liability o f Reserve Bank. Exceptspecial collection agreement under
as any amount the Reserve Bank is
as set forth in 12 CFR 229.35(b), a
which the item was presented, may not required to pay under the judgment or
Reserve Bank shall not be liable for the
decree, together with interest thereon.
extend these return times, but may
failure of a collecting bank, paying bank,
(e) Methods o f recovery. The Reserve
provide for a shorter return time.
or nonbank payor to pay for an item, or
Bank may recover the amount stated in
(b) Return o f checks not handled by
for any loss resulting from the Reserve
paragraph (d) of this section by charging
Reserve Banks. A paying bank that
Bank’s acceptance of any form of
any account on its books that is
receives a check as defined in 12 CFR
payment other than cash authorized in
229.2(k), other than directly or indirectly maintained or used by the paying or
paragraph (a), (b), and (c) of this section.
returning bank (or, if the returning bank
from a Reserve Bank, and that
*
*
*
is another Reserve Bank, by entering a
determines not to pay the check, may
10. Section 210.10 is revised to read as
charge against the other Reserve Bank
send the returned check to its Reserve
follows:
through the Interdistrict Settlement
Bank in accordance with Subpart C of
§ 210.1© Y ©8©h©duS® and availability
Sm
Part 229, the Uniform Commercial Code, Fund), if—
er©dste for ©ash stems and returned efosefea, and its Reserve Bank’s operating
(1) The Reserve Bank m ade
seasonable written demand on the
(a) Each Reserve Bank shall include in Circular. A returning bank may send a
paying or returning bank to assume
returned check to its Reserve Bank in
its operating circulars a time schedule
defense of the action or proceeding; and
accordance with Subpart C of Part 229,
for each of its offices indicating when
(2) The paying or returning bank has
the amount of any cash item or returned the Uniform Commercial Code, and its
proceeds available for use by the
sender. A Reserve Bank may be liable to
the owner, to the sender, to a prior
collecting bank, or to the depositary
bank’s customer with respect to a check
as defined in 12 CFR 229.2(k). A Reserve
Bank shall not have or assume any
liability with respect to an item or its
proceeds except for the Reserve Bank’s
own lack of good faith or failure to
exercise ordinary care, except as
provided in paragraph (b) of this section
and except as provided in Subpart C of
Part 229.
* * * * *
8. Paragraph (b) of § 210.7 is revised to
read as follows:
3
not made any other arrangement for
paynlent that is acceptable to the
Reserve Bank.
The Reserve Bank is not responsible for
defending the action or proceeding
before using this method of recovery. A
Reserve Bank that has been charged
through the Interdistrict Settlement Fund
may recover from the paying or
returning bank in the manner and under
the circumstances set forth in this
paragraph. A Reserve Bank’s failure to
avail itself of the remedy provided in
this paragraph does not prejudice its
enforcement in any other manner of the
indemnity agreement referred to in
parapraph (c)(3) of this section.
(f)
Reserve Bank's responsibility. A
Reserve Bank shall handle a returned
check, or a notice of nonpayment, in
accordance with Subpart C of Part 229
the item from the sender, paying bank,
or returning bank from which it was
received, whether or not the item itself
can be sent back. In the event of
recovery, neither the owner or holder of
the item, nor the sender, paying bank, or
returning bank from which it was
received, shall have any interest in any
reserve balance or other funds in the
Reserve Bank’s possesion of the bank
failing to make payment in actually and
finally collected funds.
* * * * *
By order of the Board of Governors of the
Federal Reserve System, June 7,1988.
§ 210.13 Unpaid items.
William W. Wiles,
(a) Right o f charge-back. If a Reserve Secretary of the Board.
Bank does not receive payment in
[FR Doc. 88-13181 Filed 8-10-88; 8:45 am]
actually and finally collected fund for an BILLING CODS S210-«1-M
item, the Reserve Bank shall recover by
charge-back or otherwise the amount of
and its operating circular. A Reserve
Bank may permit or require the paying
or returning bank to send direct to
another Reserve Bank a returned check
with respect to which the depositary
bank is located within the other Reserve
Bank’s District, in accordance with
§ 210.4(b).
(g) Settlement. A subsequent returning
bank or depositary bank shall settle for
returned checks in the same manner as
for cash items presented for payment.
12. Paragraph (a) of § 210.13 is revised
to read as follows:
@FedFRASER